The Spanish real-estate market demonstrated once more in 2015 his tremendous potential and placed itself amongst investors market of choice.The year 2015 closed on a yearly increase of rents in Spain of 3.6% in average.
An increase almost across the board
With the exception of the Basque region, all the Spanish regions have witnessed their rental prices going up, even though all of them are far from competing with Catalonia that has registered the highest growth (+10.7%) or the Community of Madrid (+6.5%).
Why such an increase?
Spain is just starting to emerge from a severe real-estate crisis that has seen property prices dropping drastically between 2007 and 2013. This crisis added to the overall economic crisis not only reduced the borrowing capacity for a majority of people but as well had a huge impact on mindset and behaviors of Spanish people in general.
In addition, it is a lot more difficult for Spanish people to secure a mortgage today than it was in the past. As such, they are more and more looking at renting, rather than borrowing from the bank to purchase their own property.
A high profitability
From the investors’ perspective, this increasing demand for rentals is one more element that guarantees excellent return on investment.
With rate of return at 5% and more, they are for that matter more and more to invest in Spain, nowadays the 6th largest real-estate market worldwide when it comes to investment.
The two big winners: Madrid & Barcelona.
For real-estate investors, Catalonia and the region of Madrid place themselves as the two big winner when it comes to rental prices increase.
First of all, the region of Madrid with an average rental prices increase of 6.5% places itself at the third rank (after the Rioja region and Catalonia). More specifically, for its capital city Madrid, the increase reaches 6.9% with an average price per sqm of 11.2 Euros and the highest growth is in the following districts: Arganzuela (10,4%),Centro (10,1%), Chamberí (10%), Moncloa (9,9%) and Salamanca (9,2%).
As for Catalonia, the average annual rental prices increase reaches a record breaking 10.7%, the highest at the national level. Barcelona establishes itself as well as the most expensive city in Spain with an average rental price per sqm at 13.30 Euros.
In Barcelona (capital), the strongest rental prices increases took place in the following districts: San Martí (18,7%), Les Corts (18,6%), Sarrià-Sant Gervasi (17,6%) and Ciutat Vella (16,2%). It is as well this very same district of the Ciutat Vella that positions itself as the most expensive district rental-wise in Spain with an average rental price per sqm at 15.90 Euros, followed at Barcelona level by Sarrià-Sant Gervasi (14,7 €/sqm per month), Les Corts (14,1 €/ sqm per month) and Eixample (13,4 €/ sqm per month).
Perspectives for the future
Although it might be difficult to forecast the evolution of the Spanish real-estate market as a whole, one clear trend is nevertheless to keep in mind : when it comes to the two main urban centers of the country, Madrid and Barcelona, the rental demand is strong and doesn’t show any loss of impetus.
Admittedly, it is foreseeable that this strong increase of the rental prices will be followed by a progressive stabilization, the real-estate markets being somehow recovering from the price drops between 2007 and 2013, but that would only be one more sign of the real-estate market recovered stability in these cities.
Property purchase prices, even though increasing since 2013, remain very attractive and offer to whoever has financial capacity excellent return on investment.